EUROCONTROL / Central Route Charges Office The significance of Economic Regulation with regard to air navigation services charges Joint World Bank ICAO ATAG Workshop Montreal, 6-8 June 2005 Mr E. SÖHNLE, Head of Economic and Regulatory Affairs, CRCO, EUROCONTROL European Joint Organisation World Bank for the Safety ICAO of Air ATAG Navigation Workshop, Montreal, 6-8 June 2005 1
regard to air navigation services charges Outline of presentation 1. Developments in regulating air navigation services charges 2. Forms of regulation 3. Regulatory initiatives in Europe 4. Impact/expected results of regulatory measures 5. Conclusions 2
regard to air navigation service charges 1. Developments in regulating ANS charges Funding of ANS through State s Budget (until 1971 in Europe): not regulated Application of full cost recovery principle: p supply side regulated by cost accounting principles established by ICAO/EUROCONTROL demand side regulated through charging formula, i.e. ex-post facto allocation of average costs to airspace users Recognition by ICAO of other economic principles, including mechanism for economic regulation of ANS charges (from circa. 2001) Single European Sky framework Regulation and corresponding implementing rules providing for incentive regulation of charges (from 2004 in E.U.) 3
regard to air navigation services charges 2. Forms of regulation 21 2.1 Soft regulation - information disclosure - performance measurement - benchmarking - target setting - economic oversight 2.2 Economic regulation Supply side - price cap Supply side - rate of return regulation - financial incentives - modulation of charges Demand side 4
regard to air navigation services charges 3. Regulatory initiatives in Europe (Single European Sky) 3.1 Basic principles User pays principle Equity, non-discrimination between airspace users Level playing field for ANS providers Gate-to-gate perspective Cost-relatedness of charges Transparency/user consultation 5
regard to air navigation services charges 3.2 Objectives Safe, efficient and cost-effective service provision Optimal allocation of resources Provision of sufficient capacity to meet demand Organisation of ANS provision independent from national boundaries 6
regard to air navigation service charges 4. Impact/expected results of regulatory measures Decrease in cost of service provision Improved service quality (reduction of delays, more direct routings, optimal flight profiles, mitigation of environmental impact) Better use of existing airspace capacity ( correct pricing signals) Investment into new capacity Possible re-direction of traffic flows/competition for traffic Impact on financial position of service providers Re-structuring of service provision generating economies of scale 7
regard to air navigation service charges 5. Conclusions Economic regulation of ANS charges addresses supply (ANS providers) and demand (airspace users) side Stimulates cost-effective service provision Sends correct pricing i signals to airspace users therefore better for use of airspace capacity Incentivises service providers to meet demand 8